TaxTMI 
TaxTMI 
2018 (5) TMI 1278
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...., an industrial undertaking, qualified for exemption from income tax under Section 80-IA of the Income Tax Act (hereinafter referred to as the 'Act'). Section 80-IA of the Act provides for deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development etc. if it fulfills the conditions mentioned in sub-section (4) thereof. Such a deduction is of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive Assessment Years. In nutshell, those undertakings or enterprises, which fulfill the conditions mentioned in sub-section (4) of Section 80-IA of the Act, are entitled to total deductions of their profits, which means, no tax is payable and the period for which such undertakings or enterprises are exempted from payment of tax is ten consecutive Assessment Years. The assessee admittedly qualified for this deduction which it started availing from the Assessment Year 1998-99. This deduction under Section 80-IA was claimed and allowed for two Assessment Years i.e. 1998-99 and 1999-2000. 2. Section 80-IA of the Act was originally introduced in the year 1991 by the Finance (No.2) ....
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....ore than 50% of the value of plant and machinery already installed as on 1 April, 2005) to the manufacturing unit situated at Baddi, Himachal Pradesh in the Assessment Year 2006-07. In view of the substantial expansion, the accused claimed deduction under Section 80-IC @100% for Assessment Years 2006-07 and 2007- 08, which was also allowed by the Assessing Officer (AO) after passing the order under Section 143(3) of the Act. 5. Sub-section (3), as noted above, mentions the period of ten Assessment Years commencing with the initial Assessment Year. Sub-section (6) may also be taken note of at this stage which reads as under: "(6) Notwithstanding anything contained in this Act, no deduction shall be allowed to any undertaking or enterprise under this section, where the total period of deduction inclusive of the period of deduction under this section, or under the second proviso to sub-section (4) of section 80- IB or under section 10C, as the case may be, exceeds ten assessment years." 6. As noted above, the assessee had carried out substantial expansion in the Assessment Year 2006-07 and, therefore, claimed exemption under Section 80-IC of the Act for Assessment Year 2006-07 on....
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....tion 80-IC(6). 48. Applying the aforesaid interpretation, we find there can be different fact situations, some of which, we have tried to illustrate; (i) a "Unit" established prior to 7.1.2003, claiming deduction under Section 80-IB, post insertion of Section 80-IC carries out substantial expansion, would be entitled to deduction only under Section 80-IC, at the admissible percentage, for the remaining period, which in any case when combined, cannot exceed ten years, (ii) just as in the case of the present assessee, a unit established after 7.1.2003, carries out substantial expansion only in the 8th year of its establishment, for the first five years would have already claimed deduction @ 100%; for the 6th and 7th years @ 25%, and then for the period post substantial expansion, in our considered view, the initial year of assessment being in the 8th year, would be entitled for deduction @ 100%, subject to the cap of ten assessment years, (iii) the assessee establishes a unit after January 2003, say in the year 2005-06 and claims deduction under Section 80-IC for the first time in the assessment year 2006-2007 @ 100% of its profits. Thereafter, substantially expands the Unit in the....
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.... was justified in holding that the petitioner was not entitled to deduction under Section 80-IC of the Act for assessment year 2008-09 and 2009-10 when the total period of deduction of ten years was expiring after assessment year 2009-10?" 10. As can be seen from the reading of paras 46 and 47 of the High Court judgment, it has taken a categorical view that the moment 'substantial expansion' is completed as per Section 80-IC(8)(ix), the statutory definition of 'initial assessment year' {Section 80- IC(8)(v)} comes into play. As a consequence, Section 80-IC(3)(ii) would entitle the unit to hundred per cent deduction for five years commencing with completion of 'substantial expansion' followed by twenty-five per cent deduction for next five years i.e. subject to maximum of ten years. Thus, the High Court accepts that when the substantial expansion is done in a particular Assessment Year and that is made during the period mentioned in sub-section (2) of Section 80-IC, not only benefit admissible under Section 80-IC shall get triggered, the year in which such substantial expansion is completed is to be treated as 'initial assessment year'. Having said so, it has put a cap of ten years....
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....ions for deduction in respect of those industrial undertakings, other than infrastructure development undertakings, which are enumerated in the said provision. On the other hand, the intention behind Section 80-IC is to grant deduction to the units making new investments in the State by establishing new manufacturing unit or even to the existing manufacturing unit which carried out substantial expansions. The purport behind the three types of deductions specified in Section 80-IA, Section 80-IB and Section 80-IC is, thus, different. Section 80-IC stipulates the period for which hundred per cent deduction is to be given and then deduction at reduced rates is to be given. If the assessee had earlier availed deduction under Section 80-IA and Section 80-IB, that would be of no concern inasmuch as on carrying out substantial expansion, which was carried out and completed in the Assessment Year 2006-07, the assessee became entitled to deduction under Section 80-IC from the initial year. The term 'initial year' is referable to the year in which substantial expansion has been completed, which legal position is stated by the High Court itself and even accepted by the Department as it has no....